Pyrrhic Victories

Pyrrhic Victories

For the third consecutive week, jobless claims in the US dropped to a fresh pandemic low in yet another piece of incrementally good news for an economy poised to either “boom” or “overheat,” depending on whether you’re prone to unbridled optimism or cynical (if plausible) skepticism.

Initial claims dropped to 553,000 last week from 566,000 the week before. Because the previous week’s figure was upwardly revised by more than this week’s decline, nobody is going to be dancing in the streets, but nit-picking aside, the labor market is clearly still on the mend.

The range on claims was 510,000 to 610,000 from 40 economists. Consensus was 540,000, so officially, Thursday’s print was a miss. But after months of horrific figures, 553,000 still feels like a “win” as long as you remember that, for now, all victories should still be described as Pyrrhic.

The four-week moving average dropped to 611,750. That’s the lowest since March 14, 2020.

Continuing claims were 3.66 million in the week through April 17. That was up slightly from the previous week’s downwardly-revised level. Consensus was looking for 3.59 million.

Obviously, a four-week average in excess of 600,000 initial claims is nowhere near what the Fed would need to see to start debating whether the labor market is approaching some kind of tipping point beyond which anyone would raise objections to continuing with the current dosage of stimulus, but one point worth noting from Thursday’s data is that GDP is very close to surpassing pre-pandemic levels.

In fact, at $19.1 trillion, the inflation-adjusted total is just shy of the mark (figure below).

While this seems somewhat uncouth given the horrific human toll the pandemic exacted from humanity and considering how many countless lives and businesses were lost forever over the past 12 months, it now seems at least possible that US growth will end up on a better trajectory than if the virus had never crawled out of… well, wherever it crawled out of.

“We strongly suspect that the level of real GDP in the US will be higher in Q4 2021 than it would have been if there had been no pandemic and the US economy had instead continued growing at its 2014-19 trend,” ING’s James Knightley exclaimed, on Thursday. He called that prospect “remarkable.”

Bloomberg echoed the sentiment, noting that total output is now “on the cusp of its pre-pandemic level, foreshadowing further impressive gains in coming months.”

Talk about a Pyrrhic victory.

Read more: In Preview Of Summer Boom, US Economy Accelerates


 

One thought on “Pyrrhic Victories

  1. I mean it would have to right? It’s the economic equivalent of a fever. The body has to work extra hard to attempt to survive the infection. Of course I suppose that invites the question when does the fever get so hot it does brain damage?

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